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III. Indirect Tax Caselaw:
1. [ Contribution by CA Sanjeev Singhal and contributor is available at sanjeev.singhal@skaca.in ]
PML Industries Ltd. Vs. Commissioner of Central Excise, CWP No. 877 of 2013, Decided on 26.02.2013, Punjab and Haryana High Court
CBEC Tax Recovery Circular is untenable, misconceived, wholly illegal and arbitrary
The Bombay High Court today (17.01.2013) granted ad-interim stay against coercive recovery pursuant to Circular No. 967/01/ 2013 – CX dated 01.01.2013 issued by the Central Board of Excise and Customs. The orders were passed in the case of Uhde India Pvt. Ltd vs. UOI WP 380 of 2013, Exide Industries Ltd vs. UOI WP No. 381 of 2013 and connected matters. The Petitions are now listed for admission on 31.01.2013 to enable the Department to file a reply. The Andhra Pradesh High Court has already granted on 09.01.2013 a stay in the matter in the case of Ultratech Cement Ltd vs. UOI W.P. No. 736 of 2013
Case Background:
The High Court had to consider two issues: (i) whether the revenue is justified in initiating recovery proceedings on the basis of Circular dated 01.01.2013, even when an application for waiver of pre-deposit is pending before the Appellate Authorities for the reason that on such application for stay or waiver of pre deposit, no orders have been passed? And (ii) whether the second proviso in sub-section (2A) of s. 35C is directory and that the Tribunal in appropriate circumstances can extend the period of stay beyond 180 days? HELD by the High Court:
(i) The Circular is purported to be issued in terms of the judgement in Krishna Sales (73) ELT 519 (SC). Though in Krishna Sales it was held that mere filing of an appeal does not operate as stay or suspension of the order appealed against, the Board has overlooked the fact that the assessee is not seeking stay only on account of filing of an appeal, but for the reason that the assessee has sought dispensing with the pre-deposit of duty and penalty and has a right to demand decision on such application, a right which is created by the Statute. Therefore, the very basis of the Circular is untenable, misconceived, wholly illegal and arbitrary. Therefore, the condition of recovery, if no stay is granted within 30 days, is illegal, arbitrary, unjustified and consequently set aside (Larsen & Tuobro (Bom) referred);
(ii) As regards appeals pending before the Tribunal, the assessee has no control over the non-disposal of the appeal on account of non-availability of infrastructure; the members of the Tribunal and the workload. The vacation of stay for the reason that the Tribunal is not able to decide appeal within 180 days is a harsh, onerous and unreasonable condition. It burdens the assessee for no fault of his. Such a condition is onerous and renders the right of appeal as illusory. An order passed by a judicial forum cannot be annulled for no fault of the assessee. Therefore, s. 35C(2A) which provides for automatic vacation of stay on the expiry of 180 days has to be read down to mean that after 180 days the Revenue has a right to bring to the notice of the Tribunal the conduct of the assessee in delay or avoiding the decision of appeal, so as to warrant an order of vacation of stay. If the provision is not read down in the manner mentioned above, it suffers from illegality rendering the right of appeal as redundant.
(Click here for CBEC Circular)
(Click here for judgment)
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